Policy affects consumer surplus

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Q1. Third National Bank has reserves of $20,000 and checkable deposits of $200,000. The reserve ratio is 10 percent. Households deposit $15,000 in currency into the bank and that currency is added to reserves.

What level of excess reserves does the bank now have? $

Q2. The market for a particular chemical called negext is described by the following equations suppose that the government restricts emissions to 100 units of pollution. Graph the Negext market under this constraint. Find the new equilibrium price and quantity and show them on your graph. Compute how this policy affects consumer surplus, and the cost of pollution. Would you recommend this policy? Why?

Reference no: EM137813

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